Tuesday, March 22, 2016

The Morning Call--Poor data = higher prices

The Morning Call

The Market

The indices (DJIA 17623, S&P 2051) kept their winning streak going, though on almost nonexistent volume.   Breadth improved and the VIX (14) crept ever closer to the lower boundaries of its short and intermediate term trading ranges.  A close in the 10 to 12 price range would represent a good level for the purchase of portfolio insurance.

The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] above the upper boundary of a short term downtrend for the third day, resetting to a trading range {15431-17758}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5471-19343}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average for the fourth day, thereby reverting to support, [c] within a short term trading range {1867-2104}, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {800-2161}. 

            Who is buying stocks (short)?

The long Treasury backed off, retreating off the upper boundary of a very short term downtrend and a Fibonacci support level.  A sign that the risk-on trade is not gone quite yet.

GLD declined back below the lower boundary of its very short term uptrend; so it looks like the consolidation process isn’t over.

Bottom line: ‘the bulls maintained control despite the Market being extremely overbought.  The indices keep overcoming resistance levels and pushing ever close toward their all-time highs.  At this point, I have to assume that those highs will be challenged.   That said, I keep reciting technical factor after technical factor that argue against a successful challenge.  I have no reason the change my mind at this point.’



            Yesterday’s economic headlines were disappointing: the February Chicago Fed national activity index and February existing home sales both missed forecasts dramatically.  However, there are a number of primary indicators that will be reported this week; so no point in trying to anticipate the trend of this week’s dataflow.

            ***overnight, two Fed speakers suggested that the economic data was sufficiently positive to warrant a rate hike, possibly as soon as April.  Confused?  So are they.

            Overseas, in another example of EU bureaucratic lassitude, Greece and its creditors decided on an early Easter holiday break from the negotiations on a new bailout agreement.

            ***overnight, the March EU Markit composite PMI came in better than anticipated while UK inflation was reported at zero; Iran said that it might join in an oil production freeze ‘at a later date’ (in other words, after it has ramped up to full production); Moody’s put Deutsche Bank on its watch list for a credit downgrade; and Canadian bank regulators have determined that their banks are woefully underreserved.

Bottom line: QE euphoria apparently continues to outweigh the US and global economic dataflow.   I assume it is because investors somehow believe that the most recent round of monetary ease will somehow accomplish what the previous central bank efforts could not.  My concern remains, as it has been for the last two years, that (1) the global economy is sluggish at best, in recession at worse (2) QE has, is and will do nothing to improve that condition, but (3) stocks are a short hair away from peak valuation.  I think this situation fraught with risk.

In my opinion, the current rally represents an excellent opportunity to raise cash reserves by selling either a portion of your profitable investments and/or sell your losers.
       Investing for Survival
            How to be wrong as an investor.

    News on Stocks in Our Portfolios

   This Week’s Data

            February existing home sales fell 7.1% versus expectations of down 3.0%.


            China’s debt will only get bigger (short):

            Brandolini’s law or why Yellen is toast (medium):

            The Fed calls its own bluff (medium):

            OPEC’s April meeting (medium):



  International War Against Radical Islam

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